Understanding PF Contributions: Can Employers Limit or Stop Payments for High Earners?

Hello. I have some questions related to PF:

1) Is the company already contributing the employer share on amounts of Rs. 6500 and above? Can they limit their contribution to Rs. 6500?

2) Following on from point number one, can the company completely stop paying contributions since the employees are already earning above Rs. 6500?

3) If the company is currently paying as per point number one for all old employees, can it exclude new employees (earning above Rs. 6500) from this liability?

4) If the answer to points 1, 2, and 3 is YES, what formalities should be completed to ensure compliance?

I would appreciate a point-by-point reply to bring clarity.

PF Contribution Limits and Employee Coverage

A company can restrict the Provident Fund (PF) contributions to 12% of Rs 6,500 even if it was previously contributed at a higher amount. This reduction in PF qualifying wages is not permitted as per Section 12 of the EPF & MP Act, and will not stand as the PF Organization has no right to demand contributions on an amount over Rs 6,500. This was decided in a Supreme Court verdict in the Marathwada Gramin Bank case in 2012.

An employee once covered by PF should continue his contribution until he leaves the organization or withdraws his PF accumulations. Therefore, the company cannot stop contributing PF for those who have more than Rs 6,500 as PF qualifying salary. It can, however, restrict the contribution to 12% of Rs 6,500.

An employee whose PF qualifying salary exceeds Rs 6,500 at the time of joining the company can be excluded from coverage. However, if the new employee has been a PF member at his previous company and has not withdrawn the accumulations upon leaving, then the present company is liable to provide him coverage. This means an existing PF member should be given coverage, whereas a new joiner who has not been covered by PF earlier can be excluded if his PF qualifying salary exceeds Rs 6,500. In such cases, the employer should obtain Form 11 from the new joiner, which declares if he was a PF member or not.

Regards,
Madhu.T.K

Yes, it is not a form to be sent to EPFO but to be kept in the office for our records. In case the EPF Enforcement Officer asks about any excluded employee, we can show it and establish that the excluded employee has not been a member of PF earlier. Form 11 is attached for reference.

Regards,
Madhu.T.K

Can anyone guide me on whether PF contribution can be stopped when an employee attains the age of 58? Also, in the practice of keeping employees employed even after the age of 70 years, should their PF still be deducted?

PF contribution cannot be stopped if the age of the employee exceeds 58 years. In such a situation, all contributions, i.e., 24%, shall be deposited into his PF account only. The Pension Account Fund shall be diverted to the PF account fund.

Yes, if the employee has resigned, withdrawn all his accumulations, and settled his account, in that case, you can keep him out of the PF preview, subject to his salary being more than Rs 6500/-.

Thank you for your valuable contribution. I want to know, is there any retirement age for PF? Can the management retire an employee at the age of 58 or 60, clear all his/her dues (like gratuity, leave encashment, etc.), and re-appoint him/her for the next 2 or 5 years?

Provident Fund Contributions for Employees Above 58 Years

There is no retirement age for Provident Fund (PF), but an employee cannot be part of the PF Pension Fund after 58 years of age. If an employer employs a person above 58 years, the employer must contribute their share of 12% to the Provident Fund along with the employee's share, without bifurcating it as 8.33% to the Pension Fund and the remaining 3.67% to the Provident Fund.

It is not mandatory that an employee who is receiving a PF pension or who has withdrawn PF accumulations should be given PF coverage as mentioned above. They can be excluded even if their PF qualifying salary is less than Rs 6500.

Please note that exclusion is granted only for employees who have withdrawn PF and/or are receiving a PF pension. A person retired from government service who is receiving a government pension and is employed in an establishment after their government service retirement should be given PF coverage. However, they are not required to contribute towards the pension fund.

Regards,
Madhu.T.K

Employee Exclusion Queries

Can an employee claim exclusion if they become a member during 54 and withdraw after 55? If an employee becomes a member before 55 and withdraws before 55, can they claim exclusion?

Purpose of Social Security

What is the purpose of social security?

Differences in Pay and Wages

What is the difference between "pay" of 6500/- and wages under the EPF Act and Pay under the EPF Scheme? Why does the exclusion only mention "pay"? Are there no court rulings on PAY?

Regards,
Anil Narayan, adv

Thank you for your valuable contribution. I want to know, is there any retirement age for PF? Can the management retire an employee at the age of 58 or 60, clear all his/her dues (like gratuity, leave encashment, etc.), and re-appoint him/her for the next 2 or 5 years?

Can an employee's membership be withdrawn during 54, and after 55, can they claim exclusion? If a member withdraws before 55, can they claim exclusion? What is the purpose of social security?

Is Rs. 6500/- considered as "pay," and what is the difference between wages under EPF Act and Pay under EPF Scheme? Why does the exclusion only mention pay? Are there any court rulings on PAY?

Anil Narayan, adv

Attribution: https://www.citehr.com/460492-pf-lia...#ixzz2TYbh3MiV

Questions Related to PF

1) Is the company already contributing the employer's share on Rs. 6500 and above? Can they limit their contribution to Rs. 6500?

If the company contribution is ongoing, the company cannot stop it. However, they have the option with new joinings under para 34 of PF Rules.

2) In point No. 01, can the company completely cease paying contributions since the employees are already above Rs. 6500?

No, if the PF membership is active, it cannot be stopped.

3) If the company is paying for all old employees as per Point No. 1, can they exclude new employees (earning above Rs. 6500) from the liability?

Yes, they can refer to para 34 of PF rules.

4) If the answer to Points 1, 2, 3 is YES, then what formalities should be completed to ensure compliance? I would appreciate a point-by-point reply for clarification.

For more information, please visit https://www.citehr.com/460492-pf-lia...#ixzz2TcFdsEBb

Regards

In some cases where the CTC is applicable, companies do not pay the partial amount from their own funds. Instead, they deduct and deposit both the employer's and the employee's parts from the CTC of the employee.

PF Membership and Deduction Queries

Please let me know if an employee was a member of PF in their previous organization, is the new organization liable to provide membership if the employee desires it. Is it possible for the organization to not deduct the employee's PF share even if they were a member already?

Thank you.

Regards,

Employer's Contribution to PF and Legal Implications

A breakup of salary with the employer's contribution to PF shown as a cost to the company is common nowadays. However, deducting both the employer and employee shares from the employee's salary is not legal.

As discussed, an employer is expected (I can only say that it is expected from a prudent employer who wishes to follow all laws) to provide PF coverage to a new employee who has been a member of PF with the previous employer, even if his PF qualifying salary at the time of joining exceeds Rs 6500. At the same time, there are employers who do not even care to provide coverage to those whose salary does not exceed Rs 6500. The PF organization can take action against them, but I am not sure if all are charged for this offense.

Regards,
Madhu.T.K